Is Informality Welfare-Enhancing Structural Transformation? Evidence from Uganda

Is Informality Welfare-Enhancing Structural Transformation? Evidence from Uganda

While Africa's recent decade of growth and poverty reduction performance has been lauded, concern has been expressed regarding the structure of this growth. In particular, questions have been raised about whether the growth is based on a commo...

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Bibliographic Details
Main Authors:	Fox, Louise, Pimhidzai, Obert
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ABSOLUTE POVERTY AGRICULTURAL INCOMES AGRICULTURAL PRODUCTION AGRICULTURAL PRODUCTIVITY AGRICULTURAL SECTOR AGRICULTURAL SECTORS ANNUAL GROWTH ANNUAL GROWTH RATE AVERAGE INCOME AVERAGE PRODUCTIVITY BENCHMARKS CENTRAL REGION COMMERCIAL CROPS COMPETITIVENESS COUNTRY LEVEL CREDIT MARKETS CROSS COUNTRY DECISION MAKING DEMOCRACY DEVELOPING COUNTRIES DEVELOPING WORLD DEVELOPMENT COUNTRIES DEVELOPMENT ECONOMICS DEVELOPMENT INDICATORS DEVELOPMENT POLICY DEVELOPMENT REPORT DEVELOPMENT RESEARCH DEVELOPMENT STRATEGIES DEVELOPMENT STRATEGY DIVERSIFICATION DRIVERS ECONOMIC ACTIVITIES ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GEOGRAPHY ECONOMIC GROWTH ECONOMIC HISTORIANS ECONOMIC POLICIES ECONOMIC POLICY ECONOMIC THOUGHT ECONOMIES OF SCALE EMPIRICAL LITERATURE EMPIRICAL WORK EMPLOYMENT EMPLOYMENT GROWTH EMPLOYMENT IN AGRICULTURE EMPLOYMENT OPPORTUNITIES EMPLOYMENT STATUS EXPLANATORY VARIABLES EXPORTS FAMILY LABOR FARM INCOME FARM INCOMES FARM PRODUCTION FARM SECTOR FARMERS FIXED EFFECTS GDP GDP PER CAPITA GROWTH PROCESS GROWTH PROSPECTS GROWTH RATE GROWTH RATES HIGH GROWTH HIGH INEQUALITY HOUSEHOLD CONSUMPTION HOUSEHOLD HEAD HOUSEHOLD HEAD AGE HOUSEHOLD INCOMES HOUSEHOLD SIZE HOUSEHOLD SURVEY HOUSEHOLD SURVEY INSTRUMENT HOUSEHOLD SURVEYS HOUSEHOLD WELFARE HUMAN CAPITAL IMPACT ON POVERTY INCOME INCOME DISTRIBUTION INCOME GAINS INCOME GROWTH INCOME INEQUALITY INCOME LEVELS INCREASES GROWTH INCREASING INEQUALITY INCREASING RETURNS INEQUALITY INEQUALITY WILL INFORMAL ECONOMY INNOVATION INTERNATIONAL POVERTY LINE LABOR ECONOMICS LABOR FORCE LABOR MARKET LABOR MARKETS LABOR PRODUCTIVITY LABOR SUPPLY LABOUR LIFE EXPECTANCY LIQUIDITY MARGINAL PRODUCTIVITY MILK MULTINATIONAL COMPANIES NATIONAL ACCOUNTS NEOCLASSICAL ECONOMISTS NONFARM INCOME PER CAPITA INCOME POLICY IMPLICATIONS POLICY RESEARCH POLITICAL ECONOMY POOR POOR HOUSEHOLDS POVERTY GAP POVERTY HEAD POVERTY MEASUREMENT POVERTY REDUCING POVERTY REDUCTION PRIMARY EDUCATION PRODUCER ASSOCIATIONS PRODUCTION RATIO PRODUCTIVITY GROWTH PRODUCTIVITY INCREASES REDUCING INEQUALITY REGIONAL PROJECT RURAL RURAL AREAS RURAL CREDIT RURAL HOUSEHOLD RURAL HOUSEHOLDS RURAL INCOMES SAVINGS SECTORAL COMPOSITION SELF-EMPLOYMENT SMALLHOLDER AGRICULTURE SQUARED POVERTY GAP STRUCTURAL CHANGE STRUCTURAL TRANSFORMATION SUBSISTENCE SURPLUS LABOR URBAN AREAS URBAN POVERTY VALUE ADDED VULNERABILITY ASSESSMENT WAGE EMPLOYMENT WEALTH WORKING CAPITAL
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20111031125636 http://hdl.handle.net/10986/3632

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Summary:	While Africa's recent decade of growth and poverty reduction performance has been lauded, concern has been expressed regarding the structure of this growth. In particular, questions have been raised about whether the growth is based on a commodities boom, or whether it is the beginning of a structural transformation that will lift workers from low-productivity jobs into higher-productivity ones. Macro evidence has suggested that the structural transformation has not started. But macro analysis misses the evidence that the process of transformation has started, because this process begins at the household level. Household livelihoods do not move from ones based on subsistence farming and household level economic activities into livelihoods based on individual wage and salary employment away from the household in one leap -- this process takes generations. The intermediate step is the productive informal sector. It is income gains at the household level in this sector that fuel productivity increases, savings, and investment in human capital in this sector. Ensuring that most households are able to diversify their livelihoods into the non-farm sector through productive informality not only increases growth, but also allows the majority of the population to share in the growth process. This paper illustrates this point with the case of Uganda which followed this path and experienced two decades of sustained growth and poverty reduction.

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